1 a) what is a farm inventory?

b) Describe the various techniques used in value assets.

a) A farm inventory is a list of assets or anything of value that can be sold in a farm.

Asset valuation is the process assigning a value to a specific property. The techniques are as
follows:

Tangible assets valuation.

This refers to a company’s assets that are physical or that can be seen, which have been
purchased by an organization to produce its products or goods as to provide the service that it
offers. Examples fixed assets like structure, land, machinery, current assets such as cash. Others
like company’s vehicles, IT equipment, investment payments, on-hand stocks and confirmed
orders.

 To compute for the value of tangible of assets;

 The company needs to look at its balance sheet and identify tangible and intangible
assets. From the total assets, deduct the total value of intangible assets.
 From what is left, deduct the value of intangible assets.
 From what is left, deduct the total value of liabilities. Therefore, what is left is the net
tangible assets or asset valuation.

Consider the following example;

 Balance sheet total assets=shs.5millions.

 Total intangible assets =shs.1.5millions.
 Total liabilities =shs, 1million.
 Total tangible assets =Balance sheet – (total intangible assets plus total liability)

=5 millions-(1.5 plus 1)

= (5-2.5) millions

Total =shs.2.5millions
Therefore, the total value of its tangible assets for company ABC =Shs. 2.5millons.
I. Valuing intangible assets;
Intangible assets;
These are assets which take no physical form. They may include patent, logos,
frenchises and trademarks. Say for example a multinational company with a sets of 15 billion
goes bankrupt one day and none of its tangible assets in left, it can still have value because of its
intangible assets such as its logo and patents that may investor and others companies may be
interested in acquiring.
II. Valuing fixed assets.
Valuation of fixed assets can be done using various methods which include the
following:
a) Cost method:
1. Cost methods is the easiest way of assets valuation. It is done by
basing the value on the price for which the asset was bought.
b) Market value method:
1. The market value method bases the value of the asset on its market
price or its projected price when sold in the open market. In the
absence of similar assets in the open market, the replacement value
method or the net realizable value method in used.
c) Base stock method:
1. Abase stock is the amount of inventory that business needs to keep
on hand in order to fulfill customer orders with a delay not greater
than expected by customers.
2. Therefore, the base stock method requires accompany to keep a
certain level of stocks whose value in assessed based on the value
of abase stock.
d) Standard cost method:
1. The standard costs method uses expected costs instead of actual
costs. Often based on the company’s past experience.
2. The costs are obtained by recording differences between expected
and actual costs.